You think price gouging is unethical, I think price capping is unethical and harmful since it encourages hoarding and shortages.
At $100 a bottle I'm going to be loading up my SUV with as many water bottles as fit and I'll be driving to the disaster area. I'll take work off, maybe even risk getting fired for that type of payday.
Is it unethical? Some people would say so, I did make tens of thousands off of a disaster. But on the other hand, if people were dying because of a water shortage, I made tens of thousands of dollars saving lives. I probably wouldn't have done that without the financial carrot.
The free market is a very powerful thing.
Price gouging in this context might imply existing suppliers with more than enough supply to keep water at affordable rates until new supply comes online, but who choose to charge exorbitant prices simply because they can. Or more realistically, they charge just below the price at which outside suppliers could profitably enter the market given the temporarily enormous transaction costs (e.g. transport) in emergency situations.
Furthermore, when discussing essentials such as water, society cannot tolerate a system that explicitly puts people into conflict. Maintenance of law & order requires a minimal degree of equal treatment regardless of circumstance as part of the social contract. And while we can argue that a $100 bottle of water might help to ensure that, e.g., only the severely sick receive water because, facing imminent death, they or someone close them is willing to pay the price, often the price may far exceed what the impoverished are capable of affording, no matter how they value it. Again, maintenance of the social contract--incentivizing the impoverished not to begin violating property rights--is often a collective action problem and not something free markets can ensure.
I agree that people use "price gouging" far too liberally and don't appreciate how price signaling works to moderate supply and demand, but there are situations where free markets cannot adequately serve a population.
No one goes to a ballgame to stock up on $5 bottles of water...
Force retailers to keep bottles of water at $0.50/bottle and the sensible thing to do post-disaster if the water supply is uncertain is to buy all of them. In the worst case, you bought something at a normal price that won't spoil essentially ever. In a not unexpected case, you have secured a supply of water for yourself and family and have something that may be barter-able for other supplies that you might need.
Here a compromise might be something like caps on price increases (maybe max 500%) and some mild rules to prevent hoarding. I remember reading something like that in actual law, but it's been a while and I'm not sure about details anymore.
It's also interesting many forms of disaster relief are provided by the governments or non-profits instead by the free market directly. This development seems like a good indicator that free markets might have significant drawbacks in such situations.
See the quote from the Texas AG in the article here: https://abcnews.go.com/US/texas-attorney-general-warns-price...
[Illegal to sell] fuel, food, medicine or another necessity
at an exorbitant or excessive price
I wonder what the caselaw looks like, and what are some actual price multipliers involved in successful and failed prosecutions.
[1] Sometimes vague standards like that are deliberately designed to incentive conservative behavior while permitting equitable treatment (give defendant benefit of a doubt) in actual disputes. Being scared you could easily run afoul of the law is partly the point. That works better when designed for enforcement by private plaintiffs where quantifiable harm must plausibly have occurred. It's prone to abuse when enforced by regulators preemptively as there's no limiting factor of manifest harm. If everybody was happy to pay $50, no harm no foul. If somebody's grandmother passed out from dehydration because she couldn't afford a bottle even though the shelves were full, then not only do we have harm but we have a concrete context to gauge "excessive". Preemptive enforcement lacks these contextualizing facts.
At a $100 water bottle price though, I can literally afford to use a helicopter to bring in water. At $20 per water bottle, I'm not sure I could afford to use a helicopter to bring water in, especially if I have to use hours of fuel in each direction.
I agree that you have to keep order. People who think their life is at risk will get violent and reckelss, and we need to limit that. But if you hit a point where water is worth $100, you are probably already past the point of keeping order.
How does price-fixing solve that problem?
However if the same bottle is sold for 1€ or 10€ then I'll think twice before pulling out the bottle, and I might even open a stand to sell part of my provisions for less to undercut the competition.
IMHO, market transactions work poorly when both actors can't walk away from the transaction. ie. when the free market has significant constraints in the "free" precondition.
Allowing gouging means resources go to people with money in an completely disjoint optimization function vs an optimization for valuing human life in an emergency. I think that's not only inefficient, it's unethical.
In the other system, water is apportioned according to who can get to the store faster, and supply never goes up because nobody has a reason to restore it. People use drinking water for washing if they have it, because it's not like you can sell it anyway.
In both scenarios the is significant inequity (whether by money or ability to get to a store fast and fight/negotiate for water). But overall, many more people suffer in scenario 2. This is obvious given all the suboptimal water use in scenario 2.
It's hard for me to understand why you'd prefer a scenario where obviously more people suffer.
If a poor family only has $500 to their name and has to spend $100 to buy water just to survive, they've blown 20% of their total networth just to survive. A middle-class family spending $100 of 15,000 is far more likely to not be affected.
It's hard for me to understand how many people on HN can't fathom that price gouging affects the people most hurt by disasters. I don't care if price gouging means you'd gather up more supplies and head to a disaster zone because you're still taking drastic advantage of the poor for personal profit. Countries like Japan don't pull this same shit, so it's too bad that we rationalize our greed as being 'for the greater good'.
We all have a moral duty to use our franchise as citizens to keep these points of view out of government.
If we allow the price of water to rise when supply is constrained, people who can afford the higher prices will use water more conservatively and board less, and people will still give it away to those who can’t afford to buy it. But people won’t have to wait in line all day to get their ration of water, and there will be incentives to create temporary channels to improve the supply of water even if those channels couldn’t be supported by the normal price of water.
And you say you're making fewer people suffer; I say you're disproportionately forcing the poor to take the brunt of the suffering.
There are thousands of stories where death, rape, theft, looting, etc have used by folks in positions of power to get what they want in these situations.
The obvious answer is to have competent government actors who can act quickly and protect human life without a financial incentive and disengage as situations improve.
You can demand all that and more if in the US healthcare market if the medical GoFundMe category is any indication. But that is perhaps too much of a digression...
Placing an upper limit means that you are less likely to be rescued at all, if the potential rescuer happens to not be a nice person (or is very risk-averse and rescuing you involves some risk).
In other words - if the person is nice, you do not need to have any limits, as they would not abuse the situation anyway. If they are not nice, with the limits they will not rescue you, but without, there is a chance that they will be overcome by greed and so will rescue you.
Sure, if your only motivation in life is money.
So would hundreds of other people, which would get in the way of actual relief efforts and probably cost lives. In fact, for enough money, you could even lobby the government to ensure that you would profit off of future disasters.
> I probably wouldn't have done that without the financial carrot.
Probably not, but others would have. And those organizations, whether private or government are also willing to help the people where there is no financial incentive to do so.
In the example you give, the result would be those that have the financial resources would stockpile the water, while poorer folks would simply die.
There are some areas like disaster relief, education, and the provision of medical services where the free market has shown itself to be woefully insufficient.
or that people would not need to have any "actual relief effort" because the savvy businessman will respond to price signals and bring in the needed goods by themselves.
Anyone with something resembling a moral compass would say so.
> The free market is a very powerful thing.
Yes. It can make horrible people at least sometimes be a boon to society instead of a drag.
That's exactly what governments are for.
Of course, it only works when they're held accountable for failures.
Whether shortages necessarily follow that depends heavily on whether there is any other motivating force in play along with institutions prepared to respond to it. In other words -- does a given society only have markets, or does it also have values?
And of course, the higher the prices, the larger the number of people to whom whichever commodity we're speaking of is simply inaccessible. At some point practical effect isn't distinguishable from hoarding/shortage and it's not obvious that discriminating by price is ethically superior.
As far as I can tell, all they do is simply limit supply. I'd seriously consider loading up a 53 foot trailer full of generators and drive them 2000 miles to Florida some years if it were legal to sell them at 2-3x retail. But it's not, so I don't bother as it's not worth my time and immense financial risk.
And I'm not even in the generator selling business. Someone who is I imagine could be quite incentivized to keep the factory open a few more shifts and ship a bit more if profits were there to offset the additional expense and risk.
Instead we have these laws that encourage stuff like a single dude living alone buying 3 cases of water at the gas station and the family of 6 who arrives an hour later can't get a single bottle. Or the dual with dual tanks in his pickup truck filling both up and the folks who come by in their Civic needing 1.5gal to evacuate can't.
The response of course to my complaints is rationing, which of course brings up a whole other giant can of worms.
What if the single dude has 1000$ and the family has 10$? The single dude can obviously just buy all the water and the family still gets none.
If you were really willing do to this, could you be so kind as to share your prognostication for where future disaster will strike with disaster planners? For you see, that task would require you at least 5 days of advance planning (assuming you were a champ at locating and ultimately selling them), probably more than a week in any actual executable plan. Even for well-forecast hurricanes, that is pushing it for advance notice.
If it were possible to increase supply sufficiently AND the markets were perfectly efficient (and cows were spherical), price controls wouldn’t be necessary - but these controls were typically introduced after disasters where people died because other people were jacking up prices to levels most couldn’t afford.
Even if it truly is possible to increase supply you may nevertheless have price increases because disasters induce demand and encourage hoarding. The solution here IMO would be to cap prices but subsidize them in order to incentive suppliers to increase supply.
The "pro price gouging" faction just points out that caps provide even worse market incentives for increasing supply and lowering prices than allowing arbitrary and free pricing (i.e, "gouging").
In reality profiteers attract a criminal element, both in terms of street criminals hawking $100 bottles of water and corruption of government and commercial officials.
IMO controlling the demand side via rationing is the most ethical approach.
Some of the alternatives are worse, not all. In fact, lots of people help alleviate misfortune without profiting from it.
You still haven't explained how Japan's response is insufficient compared to other countries either.
It'd be next to impossible to study this, because you can't readily compare disasters. I don't know how efficient Japan is, it may be that there culture is as strong as the price mechanism, or stronger. My argument is that the pricing mechanism works quite well, and that you can't simply snap your fingers and imbue say, Iowans with the essence of Japaneseness. Whereas you can snap your fingers and say "sell things at their market value".
> You still haven't explained how Japan's response is insufficient compared to other countries either.
I didn't intend to. What I said was the Japan's cultural attitude is not easily replicable and transferable, whereas markets are.
Allow gouging, and the gouger will soon have competition to drive the price down. Very quickly, the price will drop to a reasonable level. Conversely, if you price control, there is no incentive to provide the good or service in the first place, and shortages ensue.
Government price control regulations distort markets in a dangerous way.
That sounds kind of obvious from a capital standpoint alone. Disasters cause expensive damages so anyone in a position to repair stands to make money. Anyone who lacks the reserves and needs loans and financing would be needed. I don't think it in itself qualifies as unethical even - while uncomfortable to make money from the misfortune of others the alternatives are worse.
Now other associated unethical practices may be involved like price gouging, and probably happened with certainty given both the breadth of history and human greed. It goes without saying that causing the bad situation and then benefiting is an ethical failure even without any bad intent. Deliberately causing it being clear evil.